Knight Frank Thailand disclosed that during the second half of this year, many listed developers have aggressive plans to launch a number of residential projects in Bangkok. Though the market competition is very high, they believe that there are a number of non-registered migrants in the city looking to buy or rent condominium units. Nowadays, condominiums have increasingly become investment tools amid low deposit interest rates and a volatile stock market.
According to Knight Frank Thailand’s research, the Bangkok condominium market in the first half of 2016 continued to grow despite concerns over the spillover effects from the Thai economic downturn and rising household debt. The supply from the peripheral areas dominated the market; new launches now constitute 75% of the total supply as land scarcity and land cost in the CBD and City Fringe areas are the main obstacles for developers. During the first six months of 2016, large listed developers focused on transferring completed units to buyers, trying to clear unsold units in their completed projects. To boost condominium sales, many listed developers implemented campaigns for free transfer and mortgage fees. For the lower end condominium segment with unit prices below THB 1.5 million, there were over 35% of buyers that failed to secure a loan approval from the bank. Thus, many factors were at play for large developers who have to engage in every market segment, from condos with unit prices lower than THB 70,000 per square metre to over THB 200,000 per square metre. We will see new launches in the second half of this year from projects of large developers due to the competitive advantage they gain from lowering their cost of funding.
Ms. Potjaman Vorakitpokathorn, Director – Project Marketing, Residential Department, Knight Frank Thailand said, “Most developers are now focusing on targeting the middle-income market segment that is earning between THB 50,000 to THB 100,000 per month because this segment has sufficient purchasing power to buy. They also find it easier to get the bank’s approval for a mortgage than those in the lower income market. As such, we expect to see a greater number of newly launched condominiums during the second half of this year. Demand should improve from the first half of the year due to better economic conditions. The selling price is estimated to climb up, especially in the CBD area.”
Supply Trend
The Bangkok condominium supply at the end of Q2 2016 amounted to 406,305 units, increasing by 5.8% from the end of 2015. There were approximately 22,152 units added during the first six
months of 2016, a drop of 35% from the same period last year. The new launches during the first half of 2015 were approximately 34,439 units. There were three large projects launched during the first half of the year: The Politan Rive (2,359 units), Lumpini Ville Ratchaphruek- Bangwaek (1,085 units) and Lumpini Park Petchkasem 98 (1,355 units). All three projects are located in the Peripheral area of Bangkok, with a selling price in the range of THB 45,000 to THB 55,000 per square metre.
It is estimated that the condominium market will show strong growth in the second half of this year. Listed developers are planning to launch projects due to recovered consumer confidence stemming from the government’s kick-off of mega infrastructure projects. The new supply adjusted itself according to the market, and the proportion of new supply in the Peripheral area accounted for 75% of the total supply. The new supply in the City Fringe area was 15% and the CBD was 10% — as of 1H 2016. The highest concentration of new supply in the Peripheral area was mushrooming in the northern part of Bangkok, along late Paholyothin, Rattanathibet and Chengwattana areas, accounting for 41% of the total new supply in the Peripheral area.
Ms. Risinee Sarikaputra, Director, Research and Consultancy, Knight Frank Thailand said, “The location of oversupply should be in the Peripheral area of Bangkok, especially in the northern part along the Tiwanon and Rattanathibet areas, with about 53,220 units available for sale.”
Figure1
Figure2
Demand Trend
Overall, the take-up rate has increased from the end of 2015, from 78.8% to 80.4% during the first half of this year. The increase in sold rate was due to the slowing down of new launches; units sold during the first half of 2016 dropped by 4%. This was due to the weakening purchasing power of buyers and stringent loan standards by banks. As of the middle of this year, sold condominiums included approximately 326,871 units out of 406,325 units. There were approximately 79,434 units available for sale, of which around 67% were located in the Peripheral area of Bangkok. The area that has ample available units for sale is in the northern part of Bangkok, along the areas of Tiwanon and Rattanathibet. Most property developers were also launching special promotional campaigns to boost their sales; the campaigns include discounted purchase prices, special interest rate offers and more.
Figure3
Pricing Trend
The selling price of newly launched condominium projects continued to climb in every location, including the CBD, City Fringe and Peripheral areas. Land prices in the Peripheral area where the new infrastructure is to be developed will see a sharp increase in land price. Whereas the asking price for land in the CBD is incredibly high, the asking price in the heart of the CBD is at THB 2.4 to 3million per square wah. The sharp increase of land cost drives the selling price of condominiums. The average selling price of condominiums in the CBD area increased by 3%, from THB 217,706 per square metre at the end of 2015 to THB 224,237 per square metre as of 1H 2016. The average selling price of condominiums in the City Fringe and Peripheral area increased by 4%. Currently, the average selling price of condominiums in the City Fringe was THB 133,795 per square metre, where the average selling price of condominiums in the Peripheral area of Bangkok was THB 76,323 per square metre as of 1H 2016.
Figure4
